AB InBev reaps profit in Brazil, sees strong 2018 growth

BRUSSELS(Reuters) – Anheuser-Busch InBev (ABI.BR), the world’s largest beer maker, reported higher profit than expected in the fourth quarter as Brazil rebounded and savings flowed in from its 2016 purchase of SABMiller.

The brewer of Budweiser, Stella Artois and Corona said on Thursday it expected that revenue and core profit (EBITDA) would grow strongly in 2018, with revenue per hectoliter rising by more than inflation and costs by less.

Core profit (EBITDA), the result most watched by the company and markets, rose by 21 percent on a like-for-like basis in the fourth quarter to $6.19 billion, above the average forecast in a Reuters poll of $6.03 billion.

AB InBev found savings of $381 million from its near $100 billion purchase of closest rival SABMiller, bringing the total to $2.1 billion. It is targeting $3.2 billion from a deal that has added Latin American countries and extended its reach to Africa.

Brazil’s economy returned to growth in 2017 after two years of recession, with unemployment declining and retail sales picking up. AB InBev said the recovery continued through the year, with results strongest in the fourth quarter, with core profit up 23.7 percent.

Mexico was still strong, with core profit up 9.1 percent, despite disruption after the country was struck by two devastating earthquakes in September and also hit by hurricanes.

However, in the United States, the company’s biggest market, AB InBev saw Budweiser and Bud Light lose market share, although price hikes and a tight control of costs allowed core profit to increase.

The Belgium-based company replaced its North American chief at the start of the year to bolster its U.S. beer sales, which have fallen by some 15 percent since 2008 as beer has lost out to wine and spirits and consumers have shifted from mainstream lagers to beers from smaller craft brewers.

“We are not satisfied with our market share performance and are working hard to balance the share and profitability equation,” AB InBev said on Thursday.

AB InBev trades on a forward enterprise value to core profit (EV/EBITDA) multiple of about 12 times, according to Thomson Reuters data.

That is above world number two Heineken (HEIN.AS), whose margins are lower, and Danish rival Carlsberg (CARLb.CO), which has been hit by multiple problems in Russia.